Johnson Matthey

UK Corporate Governance Code

Corporate governance has faced immense scrutiny recently following the high-profile collapses of BHS in 2016 and Carillion in January 2018, with MPs, the media and the public blaming the actions of the directors and auditors and all asking the same question… where was the board?

MPs, shareholders and the public have also been asking how effective the Financial Reporting Council’s (FRC) Corporate Governance Code has been in deterring poor corporate governance at the UK’s largest companies, following a raft of corporate failures. In July 2018 the FRC released a new UK Corporate Governance Code, (the Code) for listed companies in the UK. It also issued an update on its Guidance on Board Effectiveness. The Code is applicable to all companies with a premium listing, whether incorporated in the UK or elsewhere.

The new Code applies to accounting periods beginning on or after 1 January 2019, so with that in mind, this Common Practices report looks at how companies have been reporting on the current Code. We look at some good examples of reporting and look at the “explanations” made regarding compliance with the Code. We also discuss what’s new in the 2018 Code to enable readers to prepare for the upcoming changes.

The annual reports of 25 UK listed companies with year-ends between 31 December 2017 and 30 September 2018 were selected at random for review, across a range of industries. The full list of sample companies detailing company name, period end, auditor and industry classification can be found at the end of this report.

Johnson Matthey PLC Monitor

Johnson Matthey PLC Annual Report 2018
CR Monitor Issue: 
2018/0914
Company covered: 
Johnson Matthey PLC
Period End: 
31 March, 2018
Report issued on 17 September 2018 covered the following practice issues:
Change
Disclosure of two new share-based payment plans.
Pronouncements
Extended disclosure in relation to the future impacts of IFRS 9 "Financial instruments", IFRS 15 "Revenues from contracts with customers" and IFRS 16 "Leases".
Change
Discussion of key audit matters included in audit report.
Change
Inclusion of separate director and auditor responsibility sections in the audit report.
Pronouncements
Presentation of a reconciliation of movements in liabilities arising from financing activities.
Change
Disclosure in respect of US tax changes including reduction of corporate income tax rate from 35% to 21%.

Alternative Performance Measures (APMs)

In this Common Practices report we look at what APMs are; how companies are using them; and what they mean for the users of accounts when comparing them to others. This report examines the APMs that are stated within recent company and group accounts for a sample of 20 companies. Our selected sample covers year ends from 30 June 2017 to 31 March 2018. All companies report under International Financial Reporting Standards (IFRS) as adopted in the EU. Throughout this report, we look at some of the recommendations put forward by the European Securities and Markets Agency (ESMA) in their guidelines setting out best practice on APMs in 2015, which became effective from 3 July 2016, as well as the observations made by the FRC, assessing whether and how companies have implemented them. 

Fair value measurement information under IFRS

IFRS 13 “Fair value measurement” sets out a single consistent framework for measuring fair value within IFRS financial statements and outlines a standardised set of disclosures in respect of fair value measurements. IFRS 13 has been mandatory now for some years, with application being required for annual reporting periods beginning on or after 1 January 2013. This report sets out the results of how requirements of the standard have been put into practice, both in terms of measurement and disclosure, in the consolidated financial statements of 139 large public limited companies with year ends between 31 March 2016 and 1 April 2017. It is not an exhaustive study of all aspects of IFRS 13 application and its conclusions are limited to our findings in respect of the areas analysed within the financial statements reviewed.

Johnson Matthey plc Monitor

Johnson Matthey plc Annual Report 2017
CR Monitor Issue: 
2017/1101
Company covered: 
Johnson Matthey plc
Period End: 
31 March, 2017
Report issued on 7 November 2017 covered the following practice issues:
Change
Tabular presentation of principal risks extended by inclusion of two new risk factors, "maintaining our competitive advantage" and "product quality".
Change
Goodwill recognised on business combinations attributed to opportunities to access expertise and anticipated future synergies.
Change
Added disclosure showing year on year comparison of results on a constant exchange rate basis.
Change
Disclosures on social and environmental reporting extended by inclusion of a materiality assessment in the form of a diagram.
Change
Discussion on non-GAAP measures introduced in a new annual report section.

Johnson Matthey Plc Monitor

Johnson Matthey Plc Annual Report 2016
CR Monitor Issue: 
2017/0113
Company covered: 
Johnson Matthey Plc
Period End: 
31 March, 2016
Report issued on 31 January 2017 covered the following practice issues:
Change
Recoverable amount quantified in respect of assets impaired as part of restructuring programme.
Change
Expiry details disclosed in relation to deductible temporary differences, unused tax losses and unused tax credit for which no deferred tax is recognised.
Change
Reclassification of line items in cash flow statement brings presentation into line with IFRS
Change
Graphical presentations added to audit report as part of discussion of materiality and audit scope.
Restatement
Restatement of prior year figures as a result of finalisation of provisionally accounted business acquisition.
Change
Graphical presentation presented to illustrate risk management process.

Revised definition of control in IFRS 10 "Consolidated financial statements": an emerging issue under IFRS

This report examines application of the revised definition of control in IFRS 10 “Consolidated financial statements”. We also take into consideration the guidance given by IFRS 10 to determine which companies fall within the scope of the Standard.

Financial instruments offset disclosures: an emerging issue under IFRS

This report considers company disclosures in relation to the offsetting of financial assets and financial liabilities following adoption of an amendment to IFRS 7 “Financial instruments: disclosures”. It covers the disclosure of financial assets and financial liabilities that are eligible for offsetting under IAS 32 “Financial instruments: presentation” plus disclosure of those subject to master netting arrangements or similar agreements for which offsetting is not permitted.